BP oil spill: Is BP the walrus?

PITTSBURGH — John Lennon said he wrote some of the lyrics to the Beatles’ song, “I am The Walrus,” while on two acid trips. The lyrics, written in 1967, are as befuddling as the recent admission that oil companies also had walruses on their minds when they included them in their disaster-response plans that look a lot like the one BP had in its back pocket.

The Beatles song, written four decades before Deepwater Horizon was on the world's horizon, raises all sorts of questions about the oil company executives who testified before a U.S. congressional subcommittee and admitted that their disaster blueprints addressed the fate of the walrus, even though the mammal does not swim in the Gulf of Mexico.

As politicians in the U.S., from the president to his regulatory lieutenants, struggle over how to stop the gusher that could make him and his brain trust one termers, questions about effective regulation that cross all parties and countries keep on popping up — unanswered.

(Read about the latest setback in the gulf).

Why have a regulatory regime if it is ineffective, asleep at the wheel, and in desperate need of an overhaul — as in the case of the rules and the regulators at the U.S. Interior Department’s Mineral Management Service? Why was Congress, beyond a few concerned members, not paying attention? Why did the president not crack down on an agency that was rife with cozy and inappropriate relationships with the oil industry since energy policy was high on his to-do list?

Over the eight years of the Bush administration, the theory of the executive branch prevailed that big corporations were just as interested in safety and preserving the environment as were the regulators. Any notion of costs and benefits seemed to come out on the side of costs being too high and benefits too low to do much serious regulating.

This kind of analysis, if done honestly, may have saved BP’s skin and the reputation of the global oil companies who sink their equipment deep into ocean floors. For example, when the question of paying $500,000 for a mandatory shutoff switch came up as a regulatory cost in 2003, the regulators agreed with the industry that it was an unnecessary investment and would yield little benefit.

Now, it looks as though the benefits of almost indiscriminate drilling are a cost too great to bear, especially if BP goes bankrupt, damaging the environment, the prospects for unfettered offshore drilling, and its shareholders. At the very least, making an automatic shutoff valve mandatory possibly could have saved the $20 billion BP will pay into a government-supervised escrow account for damage claims.

Yet, there still is a school of thought that says drilling will continue to yield more benefits than the costs of cleanup and damage to the environment. Some analysts say tankers cross global waterways and spill copious amounts of oil; well blowouts are rare occurrences; and countries like Mexico took nine months in 1979 to stop the Ixtoc I spill in the Gulf of Mexico that fouled Texas beaches.

“To be understood properly, the Deepwater Horizon oil spill must be viewed in perspective, particularly compared with other sources of oil in the oceans (from natural seeps and tankers) and the environmental effects of alternative fuels,” wrote conservative American Enterprise Institute scholars Kenneth P. Green and Steven Hayward.

However, the calculations are relative and often dependent on political party, unless the government is more interested in preventing accidents than mopping up after them. Norway and Brazil, for example, require remotely controlled valves to be used in the case of oil rig emergencies despite the up-front cost. These are the same emergency valves that the U.S. turned down.

Ultimately, it takes tough-minded regulators who refuse to be captured by the industries they regulate, or by the political pressure that might be coming from occupants in the White House. They might also consider the limitations of cost-benefit analysis pointed out in a book by Frank Ackerman and Lisa Heinzerling called “Priceless: On Knowing the Price of Everything and the Value of Nothing.”

“Human life, health, the natural world, and the well-being of future generations are priceless — not infinite in value, but fundamentally incommensurate with money,” said Ackerman in a 2004 critique of cost-benefit analysis. In other words, it’s hard to put a price on a fouled ocean.

These opposing points of view have always riled policy makers in Washington. Maybe in this case the real risk is believing entities are too big to fail or are safety conscious enough not to drill when the preliminary checks on the well indicated big problems ahead.

To address some of the lack of regulatory discipline that has plagued offshore drilling, Obama decided to go with Michael Bromwich, a former inspector general in the Clinton administration Justice department and federal prosecutor to lead the reorganization of the Minerals Management Service. In other words, now there is a cop on the beat.

It’s unlikely to happen, but there are those that prefer judicial rather than regulatory retribution. In that scenario, corporate wrongdoers go to jail instead of to Capitol Hill where they testify about their mistakes or make promises to protect the environment, including the walrus.

As the song says: “See how they run like pigs from a gun, see how they fly. I’m crying.” I am the walrus.